Landlords 'expect a £20k income' from their properties in retirement - and third of all retirees considering buy-to-let

Buy-to-let landlords expect their property investments will contribute almost £20,000-a-year towards their incomes in retirement, a study has found.

Landlords expect that more than half of their retirement income will come from their rental properties, an estimated £19,785, according to a survey of 500 buy-to-let investors by Platinum Property Partners.

On average investors expect their retirement income to total £35,600, with the rest made up of state and private pensions, as well as other investments.

Interest: Many people are now considering using their pensions to invest in buy-to-let.

This is significantly higher than the average pensioner household income estimated, which in 2013 was £19,300 according to the Office of National Statistics.

Millions of defined contribution pension savers will be given freedom over their retirement pots from next April under new rules revealed in the Budget, and using it to invest in buy-to-let was identified early on as a possible option for savers.

But PPP found that although a third of adults approaching retirement are considering investing in a buy-to-let, the majority have no experience of the process and aren't confident of their success.

PPP's managing director Tony Bennett said that pension-holders should not rush into any decisions once they get access to their pots.

He said: 'Anyone approaching retirement will be looking to maximise the income they are set to receive from all of their investments and buy-to-let investors are no different.'

But increasing income from buy-to-let property is not as straightforward as waiting until you reach retirement age and simply snapping up more properties.

'Healthy income can be achieved in retirement through property investment, but it needs to be researched, planned and approached in a business-like manner. Waiting until you’re at the point of giving up work is not the best option.'

Among the 35 per cent of middle earners closing in on retirement interested in buy-to-let, 45 per cent said the main reason is because it is a better investment opportunity than a pension.

And surprisingly, around two in five people already with buy-to-let properties expect to sell their properties when they reach retirement, rather than living off the rental income.

Mr Bennett said that this attitude suggests some landlords do not know the best way to go about maximizing their investments.

Retirees will be taxed if they withdraw their pension savings, but it will only be at the marginal rates of 20, 40 or 45 per cent, as opposed to the punitive 55 per cent levied currently.

Another study, this time by Friends Life, found that only 7 per cent of savers intend to take 100 per cent of their fund in cash, which would leave them open to larger tax charges.

A quarter of savers however told Friends Life that they are likely to reinvest any withdrawal they make, including their 25 per cent tax-free lump sum, into buy-to-let properties, with Isas and stocks and shares also under consideration.